Issues of Concern to Regulators
The 5th Annual Chief Regulatory Officers’ (CRO) Conference held at the New York Stock Exchange on October 14 – 15, 2009, retrospectively and futuristically considered the issues of the Global Financial Crisis – Lessons Learned; Direct Access and Cross-border Information Sharing, and the Challenges of Conducting Surveillance Across Markets.
The Financial Crisis – Lessons Learned
There was unanimity that the financial crisis was a clear demonstration that financial markets are the fulcrum of most economies, and the present systems of communication and information technology created an interlocking financial network across the globe. Regulators also recognized that notwithstanding the presence of sophisticated risk models, there were gaps in their application and user understanding given financial product complexities in most Developed Markets. Furthermore, there was acceptance that regulators, be it statutory or private, did not understand all the issues that led to the financial crisis and therefore a rethinking of oversight activities that are more responsive, knowledgeable and impactful to the ever changing market environment is necessary.
Direct Access and Cross Border Information Sharing
Based on the above, regulators are faced with challenges of market access, particularly as observers, and the issue of sharing and receiving information is problematic, if not impossible. Clearly, the matter is amplified when one considers laws and regulations that preserve territorialism and promote national jurisdictional centres. These are the ideal stimuli for restriction to direct access and cross border information sharing. Be that as it may, regulators also recognize that in today’s global market, there is need for automated surveillance systems and personnel who are au fait with current and developing market trends.
The Way Forward
Some of the hindrances that CROs highlighted are not insurmountable. The way forward is suggested:
1. Create the resolve at the governmental/political and direct market participant levels to address the concerns.
2. Develop a closer relationship between statutory and private regulators, as this would foster better information sharing and planned action in a time of crisis.
3. Equally, the call has been made to treat the regulatory framework of Developed Markets on a learning curve regarding market regulation, and therefore they ought not to be placed on a pedestal and deemed pristine. In this regard, oversight practices in developing and even emerging markets are deemed relevant.
If it is recognized that the turmoil that rocked the financial world started in Developed Markets and ventured outwards; there is always the lingering question as to what their regulatory functionaries did to prevent or even abate the occurrence given their resources and structure. This is certainly a contestable and debatable issue, and probably is not worthy for consideration if it is taken that the crisis is somewhat over, and therefore emphasis should be placed on looking ahead and possibly defining the lessons learned.